Lord Keen of Elie: My Lords, I thank the whole House for all the contributions on the Bill today. I might not answer every query posed during this stage of consideration, but—and I hope this reflects the steps that we have taken already—I would be perfectly open to, and would welcome, meeting any of your Lordships who wish to engage with me and officials prior to Committee to discuss particular issues. That is an invitation I hope at least some noble Lords will consider taking up if they have any queries.
Clearly, there are different views about the state of the Bill at this stage, but I could not accept the observation made by the noble Lord, Lord Cromwell, that it is rough-hewn. Respectfully, it appears to me that a great deal of work has been done to prepare for the issues that we shall have to address. I will look at those issues in two parts, as does the Bill, and begin with whiplash.
The noble Lord, Lord Beecham, took issue with some of the statistics and suggested that perhaps matters had turned, but let us be candid. I shall not use some of the terminology used by noble Lords about a racket or anything else. What we have is a very obvious and clear trend in the development of claims for road-traffic-based whiplash injury. It has been going on for more than 10 years. The consequences are very clear and obvious; it may well be that we should have considered acting sooner to address this issue, but act we must and that is what we intend to do.
The New England Journal of Medicine recently carried out an analysis of the incidence of whiplash injury and the availability of compensation. It discovered a  very obvious correlation between the availability of compensation and the incidence of whiplash claims reported in road traffic cases. The noble Earl, Lord Kinnoull, observed that when he attended meetings with the reinsurers Munich Re in Germany it had alluded to the situation in the United Kingdom, which is quite exceptional. Unless Scandinavians have much thicker necks than us in this part of the world, there is little to conclude except that a claims culture has developed, because the incidence of these claims in that part of the world is very different from our own.
We therefore have to address how these claims will be contained in the wider public interest and, ultimately, in the consumer interest. However, I do not suggest that any one part of the community is wholly or solely to blame for the situation we now find ourselves in. For example, I do not demur from the suggestion that insurers have been complicit in the development of this claims culture over the past 10 years or more in their willingness to avoid undue expense and simply to settle claims without the necessity for any form of real evidence. Many noble Lords have experience of that themselves.
However, there is some rationale to the way in which we are attempting to approach this matter, and it includes the reference to proposed changes in the small claims limit as well. The idea of a tariff is not entirely novel; such an approach has already been taken in Italy and in Spain, where they faced a similar claims culture. We are, first, bringing together a tariff and, secondly, making it a requirement that no claim can be settled without a medical report, or MedCo report. I discern that there is almost universal approval for that step. Thirdly, we have agreed that the claims portal for small claims will be reviewed, which the noble Lord, Lord Marks, suggested would be required, to make it accessible to claimants themselves when they come to make claims. It will of course be simpler for them to make that claim in circumstances where they know that there is, beyond the issue of liability, a tariff that determines the damages for pain and suffering. I emphasise those damages because this does nothing in respect of the claims for wage loss and other outgoings incurred by claimants in the circumstances.
I will also take up a point mentioned by the noble Lord, Lord Marks, with regard to the cost as compared with the tariff of damages at the very lower end. I understand that where liability is accepted, the cost of the MedCo report will be a relevant recoverable cost, no matter whether this is in the small claims court or otherwise. Another question that has been raised is how the original cost of the MedCo report is funded, and we are looking at that and discussing it with interested parties at present. However, there will be no material issue over the recovery of the MedCo report cost itself, which the noble Lord identified as in the region of £180 plus VAT.
That, then, is the background. There are other potential targets. The noble Lord, Lord Beecham, referred to the conduct of claims management companies, and I will say a little about that. As noble Lords will be aware, we are already taking steps through the Financial Guidance and Claims Bill, which is making its way through the other place, to address some of the difficulties that arise with regard to claims management companies.  First, their regulation will go to the FCA. As the noble Earl, Lord Kinnoull, observed, that is a regulator with teeth, and we consider it properly positioned to deal with claims management companies. There will also be the means to limit the percentage that claims management companies can take from a claimant when they deal with a claim, to try to control their activities in that regard.
We have of course been concerned with the issue of cold calling, which I suspect has bedevilled virtually all of us at one point or another. The Information Commissioner is concerned with that as well. One of the difficulties, and this was touched upon in the course of debate, is how to regulate the unregulated. One of the real difficulties is that in the context of cold calling, we have seen the claims management companies, or those who carry out this cold calling, move out of the United Kingdom and carry out this conduct from abroad. It is a very simple thing for them to do, and it is a very difficult thing for us to stop. That is why you have to look at alternative routes to addressing the wider issue that we have to deal with. We are certainly concerned that we need to control the activities of the claims management companies, although they alone are not responsible for the way in which this whole industry of whiplash claims has developed.
I notice that the noble Lord, Lord Monks, who I appreciate is not entirely sympathetic to the Government’s position on this, did make a passing remark in the context of other claims, such as workplace claims. He said the abuse was a lot less than in road traffic accident cases, but implicitly he accepts the existence of abuse in the context of RTA cases, and I believe that is almost universally acknowledged. We seek to address that in Part 1 of the Bill. We consider that we are taking a proportionate approach. Yes, it distinguishes whiplash-type injuries that occur in a road traffic context from other forms of accident or injury, but that is because we have to address a particular mischief. That is what we are doing with Part 1 of the Bill. It appears to us that this is the sensible and considered way forward in order to control this situation.
I note that the Delegated Powers Committee has made a number of recommendations with regard to Part 1 of the Bill. We do not entirely agree with its recommendations, but I have noted the concern expressed by noble Lords about the question of defining whiplash injury. The intention was to have a degree of flexibility, so that if the claims industry developed in a particular direction in response to legislation, we were equipped to deal quite rapidly with that. It may be that noble Lords would like to see rather more in the way of definition so far as whiplash is concerned, and I take on board the observations that have been made.
There is also the question of the tariff, and of course an illustrative tariff was provided in the papers that were produced along with the original Bill and to which reference has been made. We consider that being able to regulate the tariff by the affirmative procedure is a more flexible way of being able to respond to changes. But, again, I hear what noble Lords say and we will have to consider that going forward.
I would like to respond to a number of points made by the noble Lord, Lord Sharkey. First of all, I hope I have made clear that medical report costs are recoverable. There was a suggestion that they were not. He referred to the position of other parties such as cyclists being caught, but they are not brought within the tariff on the basis of Part 1 of the Bill. To answer that particular point, they are specifically excluded at Clause 1.
I would like to move on to Part 2, the question of the discount rate, and address a number of points. First of all, it appears to be generally understood that we do need to put in place a means by which the discount rate can be determined and reviewed on a regular basis in order that we do not encounter the sort of situation we had in 2017, when we saw it go from 2.5% to minus 0.75%. I wholly agree with the observations of the noble Earl, Lord Kinnoull, that the present discount does not realistically reflect the way in which a party—any party—is going to invest funds going forward. Therefore, we have to bring this back into a realistic scenario.
The objective—here I address a number of points made by the noble Lord, Lord Cromwell—is not to have representatives of various interested parties partaking in an exercise of trying to agree a rate. The whole point of the structure in Part 2 is that there should be an expert panel, not a representative panel. The noble Lord asked about there being a fair balance of representation on the panel, but that is not the intention or the objective. The idea is that we should have an expert panel to advise the Lord Chancellor.
The intention is that that should be an open exercise so that, for example, the way in which the expert panel reports to the Lord Chancellor will be open. Indeed, in our response to the Justice Select Committee, the Lord Chancellor observed that he would be publishing the recommendations of the panel’s report in circumstances where he received it and was to act upon it. In due course, he will also be required to explain the way in which he fixes the discount rate. Indeed, he will be amenable to judicial review in carrying out that function, so that there will be ultimately an oversight of the way in which he discharges that duty. We consider it appropriate that that should be done openly and effectively in that way.
Clearly, it will be important that the discount rate should be reviewed at regular intervals. We have alighted upon the period of three years for review after considering various representations, but I have heard the references to five years as a review period and the interesting alternative mentioned by the noble Lord, Lord Marks, of essentially having an expert panel meeting at regular intervals to consider whether or not there are circumstances that might require a proper review of the discount rate. We would be open to discussing these alternatives to see how we can effectively ensure that the discount rate continues to reflect the reality of investment.
On the point of investment, I believe there is general consensus that we should move from the very-low risk level to the idea of a low level of risk for investment. That is not to suggest that claimants are going to become stockbrokers—I really do not feel that that is a proper reflection of the situation at all. The intention  in Part 2 of the Bill is to bookmark the place in which the expert committee will address the question of how the discount rate should be fixed. It is to give the panel a degree of flexibility in that context between, at one end, very low risk and, at the other end, low risk by an investor who is not concerned about having to provide for their future care.
On the question of future care, which arises most particularly in the context of clinical negligence cases and the subsequent cases of severe injury that very often arise from that, there is always the difficulty of determining not only what the appropriate discount should be but, as noble Lords have observed, what life expectancy may be. That is always an estimate. You could almost say that you invariably get it wrong; you can never be sure that you have got it right. That is why we consider that PPOs are a very important option available to claimants. Looking at the data that has been gathered in arranging guidance for the Bill, we have noted that their use is essentially limited to cases where claims exceed £1 million, and more generally £5 million. They are not always taken up, and one of the problems with the present discount rate is that it would tend to discourage claimants and their advisers from taking up PPOs. But clearly, if you want certainty with regard to future care, one way to secure it is to agree to a PPO, and we would wish to encourage them.
We have to underline, however, that PPOs are not universally available. For example, I understand that the Medical Defence Union, which is a mutual, is not in a position to guarantee future payment of a PPO and therefore not in position to provide them. However, that may alter as we look at the question of indemnity arrangements—for example, in respect of general practitioners—which we are doing at the present time. We certainly wish to encourage the use of PPOs and are looking at providing guidance to claimants and their advisers, in order to ensure that they are taken up in appropriate circumstances.
One further issue that has been raised by a number of your Lordships is Section 2(4) of the 1948 Act. We recognise the question that is being raised about this and the appropriateness of maintaining that. Presently, Section 2(4) of the 1948 Act would not fall within the scope of the Bill. I appreciate that, if we were to amend the long title of the Bill, we might be able to bring the matter within scope, but there is a concern that the repeal of Section 2(4) potentially raises issues that will have to be the subject of consultation with interested parties. We are concerned that we need to act promptly, particularly with regard to the discount rate, and it would be unfortunate if that process was materially slowed because of an attempt to bring Section 2(4) and its repeal into the present Bill. I hear what noble Lords have said and am not unsympathetic to the suggestion that the time has come to revisit that provision and understand why we need to maintain it. My concern is that attempting to bring it into the Bill at this stage could have unfortunate consequences for the way in which we are trying to deal with the discount rate.
On that last point, I appreciate the concern about the delay in respect of the discount rate. We are proposing to carry out the first review as swiftly as possible.  I understand that we are aiming for April 2019, not 2020 as has been suggested. There is a 90-day period and then a 120-day period. There is a need to have an expert panel in place, but considerable steps may be taken in anticipation of the Bill passing to ensure that we have the machinery in place for the swift appointment of an expert panel, so that the review can be carried out as soon as possible. I will take further advice from officials on the question of how far we can go with that sort of preparation prior to Royal Assent of the Bill, in order to move swiftly on that matter.
I appreciate that I have not addressed all of the queries that have been raised this afternoon. In the time available, I regret that I will not be able to do that but, as I said at the outset, I am open to meetings with noble Lords who wish to raise questions on the Bill prior to Committee, and I would welcome the opportunity to engage with them. I beg to move.
Bill read a second time and committed to a Committee of the Whole House.